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TMI Blog1983 (10) TMI 94X X X X Extracts X X X X X X X X Extracts X X X X ..... on 5(1)(i) of the Act. The WTO negatived both the contentions of the assessee by observing that the word 'individual' includes a group of persons forming a unit or an AOP and for this proposition, reliance was placed on the two Supreme Court decisions in the cases of CIT v. Sodra Devi [1957] 32 ITR 615 and Banarsi Dass v. WTO [1965] 56 ITR 224. The WTO further held that the assessee was not entitled to the immunity available under section 5(1)(i) inasmuch as the assessee had been carrying on activities of profit and also on the ground that as per rule 2 of Chapter XIV, the surplus funds of the association representing accumulated subscription and interest were liable to be distributed amongst the members of the association in the event of the dissolution of the association. The wealth-tax assessments were, accordingly, completed in the status of an AOP on net wealth of Rs. 11,63,661 for the assessment year 1968-69 and on net wealth of Rs. 13,01,944 and Rs. 14,44,855, respectively, for the assessment years 1970-71 and 1971-72. The AAC upheld the assessments vide his consolidated order dated 5-12-1981. 3. The present appeals filed by the assessee are against the said order of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t an assessable entity. The learned counsel also placed before us a copy of an unreported decision of the Calcutta High Court dated 30-5-1983 in Civil Rule No. 1585W of 1977 in the case of Royal Calcutta Turf Club v. CIT [1983] 144 ITR 709 wherein their Lordships by following the Gujarat and the Bombay High Court decisions in the case of Orient Club, held that a members' club being an AOP could not be an 'individual' entity and, consequently, is not chargeable to wealth-tax. Alternatively, it has been argued that even if it is held that the assets of the association are chargeable to wealth-tax, the entire wealth of the assessee is exempt in terms of section 5(1)(i). In this context, the learned counsel brought to our notice the various objects of the association enumerated in paragraph 3 of Chapter I of the rules and regulations framed by the Indian Jute Mills Association. It has been stated that the different objects enumerated in various sub-clauses should be read together and in this connection he made particular reference to one of the main objects of the association, viz., rule 3(1) providing the manner in which the inter se relationship between the members as also the employ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal. It has been pointed out that even in the case of a trust, where some of the objects were not of a public charitable nature, it has been held by the Bombay High Court in the case of Trustees of K.B.H.M. Bhiwandiwalla Trust v. CWT [1977] 106 ITR 709 that the objects of the trust being predominantly for charitable nature, the assessee-trust was entitled to the deduction under section 5(l)(i). 6. The departmental representative while supporting the orders of the authorities below drew our attention to the Full Bench decision of the Kerala High Court in the case of Kerala Financial Corpn. v. WTO [1971] 82 ITR 477, wherein it has been held that the term 'individual' in section 3 is not restricted to human beings as it includes a corporation similar to the Kerala Financial Corporation constituted under a Central, Provincial or State Act. In regard to the point whether the assessee is entitled to exemption under section 5(1)(i), the departmental representative reiterated the points raised by the WTO, viz., that the assessee carried on activities for profit and it was stipulated in the rules of the association that in the event of its dissolution, the surplus funds were liable to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able of owning the property. Even though members for the time being own the property, their right, merely consists of the enjoyment of the property because the right of ownership is not transmissible and it can only materialise at the time when the club as a body will stand dissolved. If the membership of a club could be obtained only voluntarily and on becoming a member, and the rules of the club became part of the conduct of members inter se in the case of an unincorporated club, then it is obvious that the club becomes an AOP'. In the instant case the assessee-association consisted of 58 members and the status of each member was that of a corporate body. Such an association, in our opinion, cannot be equated with that of an unincorporated members' club as in that event the assessee could not have a separate existence other than its members. The fact that the members of the assessee-association are all juristic persons implies that the assessee has a distinct personality capable of regulating the inter se relationship between the different corporate bodies, who are its members. However, under section 13 of the Trade Unions Act, 1926, the association is a body corporate with power ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and to promote the commercial exploitation of the results of such research. (viii) To foster existing markets and open out new markets in India and abroad through publicity and public relations work, the establishing and maintaining of branch offices of the association overseas, the organising of trade delegates and study teams, the undertaking of market surveys and other suitable promotional media. (ix) To seek and/or obtain from any Government or any public authority or any company, body corporate, firm or person, bounties, subsidies, grants or donations for the purposes of the association on such conditions and in such manner as the association shall think fit. (x) To encourage the use of standard forms of contract in the trade and to assist in securing general recognition of, and adherence to establish trade customs and practices. (xi) To work for the proper definition of standards of quality of jute and jute products and to encourage the maintenance of these standards. (xii) To provide training facilities in jute technology for the benefit of the members. (xiii) To promote sound relations between the members and their employees through the observance of common lab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ording to the departmental representative, the said sub-rule runs contrary to the provisions contained in sub-rule 2 of Chapter XIV, wherein the manner of distribution of funds in the event of dissolution of the association has been prescribed. 9. Section 5(1)(i) exempts any property held under trust or other legal obligation for any public purpose of a charitable or religious nature in India. The corresponding provision in the 1922 Act, as it stood in 1956-57, i.e., at or about the time when the 1957 Act was enacted by the Parliament, namely, the provisions of section 4(3)(i) of the 1922 Act read as follows : "(3) Any income, profits or gains falling within the following classes shall not be included in the total income of the person receiving them : (i) Subject to the provisions of clause (c) of sub-section (1) of section 16, any income derived from property held under trust or other legal obligation wholly for religious or charitable purposes, insofar as such income is applied or accumulated for application to such religious or charitable purposes as relate to anything done within the taxable territories, and in the case of property so held in part only for such purposes, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the revenue, namely, that the assessee is engaged in a business actively for earning of profits, to our mind is not tenable as the assessment years involved in the present appeals are all prior to the assessment year 1973-74, i.e., before the insertion of section 21A of the 1957 Act in the statute book. Now coming to the second objection of the revenue, viz., that the objects of the assessee are not directed towards any charitable purpose, since the surplus funds of the assessee in the event of its dissolution were to be distributed amongst the jute mills, there is no discussion in the WTO's order about the actual activities of the Indian Jute Mills Association. We have been told that the said association is a representative body of the jute industry and its activities embrace, inter alia, liaison with Central and State Governments, provision of various services to its members, market research, advancement of trade, export promotion, public relations and research and product development. It is not known what the learned counsel means by 'provision of various services to its members' and what were the activities of the assessee towards encouragement of research for improved product ..... X X X X Extracts X X X X X X X X Extracts X X X X
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